Morningstar finalised their acquisition of ESG ratings and research company Sustainalytics on Monday, building upon their continued efforts to provide sustainable investment analytics to the everyday investor. The purchase included an initial liquid offering of €55 million as well as performance-based cash payments based upon Sustainalytics’ revenue over the next two years.

The Story

The financial services giant who previously purchased a 40% stake in Sustainalytics back in 2017 announced their intention to purchase the remaining tranche last April in order to take full ownership of the company. According to their own reports Morningstar intend to keep all Sustainalytics staff and executive team in place in a hope to bring on board their “deep ESG expertise, market leadership, and an extensive suite of security-level and country-level ESG data, research, ratings, and products”.

Who are Sustainanalytics?

Sustainalytics have been championing sustainability in various sectors for over 25 years, offering in-depth ESG data on over 40,000 companies with its security-level ESG Risk Ratings forming the cornerstone for indexes and investment products across the globe. Sustainalytics have also shown that they aren’t afraid to voice their concerns over unsustainable practices as not only were they responsible for raising concerns over Volkswagen’s dangerous levels of CO2 emissions months before the scandal was made public in 2015 but they were similarly ahead of the curve before it was revealed that Fiat had been breaking emissions laws in 2017. 

Sustainalytics have been praised for their efforts in the field of SRI  on multiple occasions, including recently when they were recognised as the largest verifier for certified climate bonds for the third year in a row and given the ESG Data Provider Of The Year Award for the second consecutive year.

They contributed to the launch of not only the Global Compact 100 index but also the Jantzi Social Index.

Sustainanalytics’ ratings help make green investments like wind power more attractive to investors

Impacts of aquisition

This acquisition could represent hopes of a more robust future for the current uptick in sustainable investment interest, while also, when coupled with their sustainability rating system, highlighting Morningstar’s dedication to furthering sustainable investment vehicles as a whole. Morningstar CEO Kunal Kapoor re-emphasised the firm’s desire to encourage more investors to transition to portfolios based on sustainability whilst also stating that they were “excited to have [their] sights on this next horizon alongside Sustainalytics”.

And that horizon is looking brighter every day as Morningstar have stated they intend to “further integrate ESG data and insights across the firm’s research and solutions for all segments” which will include “individual investors, advisors, private equity firms, asset managers and owners, plan sponsors, and credit issuers.”. 

The synergies between the two companies are clear. With Morningstar’s dominant market share and Sustainalytics’ fervent dedication to increase the influence of ESG criteria across the board this seems like a match made in heaven. Not only have the two corporations already been in partnership for over 3 years but they both share similar ideals in making the world of investing a better place.